In your dreams, the competition is poor, lame, blind and
toothless--the kind of opponent you could knock out with a flick of
your finger. In reality, your competition makes Godzilla look like
Jiminy Cricket. These guys are big, bad and backed by corporate
billions.

We're not talking about that mean three-unit chain down the
road. We're talking about Starbucks, Wal-Mart, NikeTown and
Tommy Hilfiger. Companies with the size--and the style--to make
almost any competition look shabby.

What kind of maniac takes on these kind of competitors? The kind
who recognizes a hot market, knows how to cultivate a niche, and
isn't afraid of a fight. It's not your average business
owner who can mix it up with a corporate giant and come out on top.
But then, that's part of the fun.

On Common Grounds

The lattes at Michael d'Addio's Stonewall Gourmet Coffee
Co. must pack a wallop. Maybe it's the caffeine; maybe it's
some kind of super-fortified milk--something gave d'Addio the
fortitude to take on the two (count 'em, two) Starbucks that
share his West Hollywood, California, neighborhood.

"I've got Starbucks coming and going," jokes
d'Addio, 55. "There's one down the block and across
the street. One had a 5-year head start, and people in this
business know habits are hard to change." Yet d'Addio
isn't obsessed with competition: In fact, he's committed to
further expansion. Although it's only been two years since he
started the first location, he opened a second Stonewall in
Hollywood last October.

Here's why: D'Addio isn't trying to be all things to
all people. He's meeting the needs of his community, in this
case, a city with a large gay population.

But this isn't a simple case of niche marketing. Nor
marginalizing a business in the name of local flavor--you don't
have to be gay to enjoy Stonewall's killer mochas. But if you
are, and live in the neighborhood, you can't miss the
company's marquee name (Stonewall refers to a famous gay
uprising) and its charitable sponsorships, donations and on-site
fund-raisers.

"We've practically bankrupted ourselves [with community
projects]," which range from donating coffee and water at
various AIDS-related events to hosting a weekly comedy night at
both cafes to benefit the neighborhood gay and lesbian center,
d'Addio reports. "It's taken time and money, but
it's paid off: People know who we are." Which is a company
more distinctive than any house blend and more intense than even
mud-thick espresso. What Starbucks is to global expansion,
Stonewall is to community marketing.

Where The Action Is

Even with d'Addio's commitment and heart, going up
against powerhouse isn't something experts recommend.
"These are tough guys,' says William C. Lazier, a
business professor at Stanford University and co-author of Beyond
Entrepreneurship: Turning Your Business into an Enduring Great
Company (Prentice-Hall). "They're smart, good at what they
do, and typically operate with higher margins [than
start-ups]." With these stakes, it seems only a genius or a
fool would want to enter the game.

But sometimes you have to play with the big boys to get in on
the action. And jumping into a hot market isn't necessarily a
bad idea. "New entrepreneurs often come up with [breakthrough]
ideas they think are extraordinary, but the market isn't
developed," Lazier explains. "The problem then is finding
enough money to develop a new market." For those just starting
out, creating that kind of momentum can be impossible.

This reasoning--or perhaps its opposite truth--prompted Jerome
Darby, 33, and James Sonzero, 36, to get into the highly
competitive underwear business. The founders of Papi Inc. in New
York City had seen other companies, from Joe Boxer to Calvin Klein,
create a stir in the undergarment industry, and figured one good
turn deserved another.

"All men wear underwear," notes Darby, "so we
knew there was opportunity." But going up against everyone
from Hilfiger to Fruit of the Loom presented its challenges.
"Getting department store space was nearly impossible,"
says Darby. "But with so many companies [promoting underwear],
consumers do have a greater awareness."

To differentiate itself, Papi is focusing on the Latino market,
which the partners feel has been overlooked by most brands. Vividly
sexual (but not pornographic) ads depicting Latino models have
apparently grabbed enough attention to generate interest at the
retail level. "Our boutique business is strong,' says
Darby. "We're seeing 100 percent sell-throughs, sometimes
in two days." In time, Darby and Sonzero hope Papi's
success in this ethnic niche will serve as a springboard to new
markets and products--the company, which projects 1999 sales of
$2.5 million, will launch a sportswear line this year.

Keeping one's focus keen--like Papi's--makes good sense
for small firms. By keeping your eye on the ball, you can fashion
yourself into a player, albeit on a slightly smaller field. Yet
even when you find a unique position, you can't count on owning
the game forever. Whether you're an independent bookseller in a
town without a Barnes & Noble or a hardware retailer in one of
the few remaining Home-Depot-free zones, your competition is
coming. And it's probably going to be big.

"Most category-killer concepts operate on a
market-saturation strategy," explains business consultant Don
Taylor, founder of Data Staar Communication in Amarillo, Texas, and
co-author of Up Against the Wal-Marts (Amacom). "They keep
growing to keep their stock up, so they're going into smaller
and smaller markets. If you feel like [big competition] won't
impact you, you're probably being naive."

Plugging Yourself In

Competition has made an impact on Mike Tucker's appliance
and furniture business, Tucker's Best Brands Plus in Rogers,
Arkansas. It's not just that folks in Tucker's neck of the
woods shop at Wal-Mart (and its appliance-selling corporate child,
Sam's Club): Tucker estimates that 40 percent of the people in
his local market are Wal-Mart employees.

"I'm about six miles from Sam's Club and seven
miles from Wal-Mart corporate headquarters,' says Tucker,
46, who co-owns the business with his wife, Joan. "When we
bought this business [in 1988], there wasn't much competition.
But now, there are probably five stores that compete with
me."

Tucker has had the good sense to shore up his strengths. He saw
that competing strictly on price was a losing battle, so he
emphasized service and went after the demographic most likely to
prize it. "A lot of retirees in our area are used to getting
[good] service, and are willing to pay for it," says Tucker.
"We recently spent six days working with a customer on a
purchase. We spent a lot of time but made a $25,000 sale--and the
customer got exactly what she wanted. You can't run a chain
[with the same attention] you can give to one store."

But Tucker has also been smart enough to see the limitations of
going it alone--and he's been fortunate enough to belong to a
buying group with real initiative. Germantown, Tennessee-based Best
Brands Plus began strictly as a buying group--helping independent
store owners pool their resources to secure better prices on
merchandise. Recently, however, it's expanded its mission to
include a variety of programs, such as developing point-of-sale
computer systems, providing demographic and marketing information,
and creating design prototypes for store owners who want to update
their interior decor.

Tucker was first in line for renovation, although he admits it
wasn't easy turning his store over to Best Buy Plus'
professional designers. "At one point, the designer said he
was going to paint pink and red triangles over a [display],"
Tucker recalls. "I called a time out. I said, `Hunter green
and burgundy are okay, but pink and red don't do a lot for old
Tucker here.' " Yet this was precisely why Tucker
needed a designer's help. "He finally talked me into it,
and now I like it," Tucker reports. "The store looks
impressive."

Sales have followed suit. Although the renovation cost Tucker a
cool $1 million, sales volume quickly rose 250 percent, and Tucker
saw a profit after only two months. It was the collective
intelligence of the buying group that provided Tucker with the
means and motivation to make this necessary change, but it was
Tucker's competitive will that made the change possible. Score
another one for the underdog.

Fancy Footwork

Being the underdog isn't without its benefits. It gives you
the authenticity of Stonewall, the character of Papi, and the
personal touch of Tucker's Best Brands Plus. Being small also
affords greater maneuverability: It's easier to think like a
revolutionary when you aren't bogged down by corporate
weight.

Not that Birmingham, Alabama, entrepreneur Howard Ruttenberg
would describe his revolutionary journey as easy. Ruttenberg, 56,
moved to the United States from South Africa in the mid-1970s,
eager to escape the mounting political turmoil in his native
country. In 1977, using a $20,000 investment, he opened an athletic
shoe store called Just For Feet.

It was unremarkable. "We were profitable every year [after
opening], but we earned very little at first," Ruttenberg
recalls. "There were many days when things looked bleak. I was
ready to mortgage my home--and everything else--for a good many
years." While Ruttenberg plugged away, athletic shoe chains
aggressively increased their market share. Just For Feet could have
been lost in the shuffle.

But Ruttenberg didn't allow it. With limited capital, he
couldn't out-expand the major chains. But, he thought, perhaps
he could blow the competition out of the water one store at a
time.

How? In 1988, Just For Feet opened its first superstore.
"We were the first category killer in our industry," says
Ruttenberg. But this wasn't simple shoe retailing, it was the
Disneyland of shoes. In addition to an encyclopedic selection of
styles, the company provides its customers with knowledgeable
service in a fun atmosphere.

Today, a visit to Just For Feet is only slightly less
exhilarating than winning the NBA finals. "We have basketball
courts, restaurants and video screens in our stores. We invite
sports celebrities to make appearances. We just launched our own
satellite so we can do live broadcasts to our customers or
employees at any time from our company headquarters," says
Ruttenberg.

At a time when athletic shoe sales have flattened overall, Just
For Feet is growing by leaps and bounds. Ruttenberg estimates 1998
sales at $800 million--up from $23 million in 1994--and projects
that 1999 sales will reach $1.2 billion. "We've been
averaging better than 100 percent growth, year after year, since we
went public in March of 1994," he says. With 125 superstores
and 120 smaller locations nationwide, Ruttenberg calls himself the
number- two player in the athletic shoe industry.

While the trip from obscurity to fame hasn't been quick or
effortless, it is satisfying: "Our competitors don't have
the ability to push us around any more," Ruttenberg observes.
"Our vendors think we're the future. It feels
great."

No Trophy Necessary

Of course, prevailing over the competition isn't always a
question of outpacing them--or even giving them a run for their
money. Tucker, for example, has no intention of expanding beyond
his one highly successful location. Darby and Sonzero want to be
contenders in the fashion business, but they don't necessarily
have to leave Tommy Hilfiger and Ralph Lauren in the dust to
achieve that. And d'Addio, while intrigued by the idea of
expansion, never envisions a day when his chain eclipses Starbucks.
"We intend to be alternative in every way," he says.

In that, there's also a kind of triumph. Let the big guys
throw their weight around. Let 'em defend the status quo.
Ultimately, taking on Goliath isn't about defeating the giant.
It's about having your own day in the sun.

Long Shot To Hotshot

Papa John's International

Founder: John Schnatter

Founded: 1984

The competition: Pizza Hut, Domino's

Strategy: Made taste an issue in ads; used
Pizza-Hut-cofounder-turned-Papa-John's-franchisee Frank Carney
as symbol of new allegiances.

Strategy: Devised marketing, product development and
distribution tactics to make the competition irrelevant; key figure
in government's antitrust lawsuit against Microsoft.

Take that! $447.8 million in sales for fiscal 1998 (10-month
year); company acquired last year by America Online for $4.2
billion; at press time, antitrust suit still pending.

Ben & Jerry's

Founders: Ben Cohen & Jerry Greenberg

Founded: 1978

The competition: Haagen-Dazs

Strategy: When Haagen-Dazs tried to muscle Ben & Jerry's
out of supermarket distribution in 1984, the Vermont company filed
suit and launched its famous "What's the Doughboy Afraid
of?" campaign (in reference to Haagen-Dazs' former parent
company Pillsbury).

Take that! In 1998, Ben & Jerry's sold $209 million
worth of ice cream and frozen yogurt, largely through
supermarkets.

Southwest Airlines

Founders: Herb Kelleher & Rollin King

Founded: 1971

The competition: American, United and other major airlines

Strategy: Took flight by focusing on profitable routes; created
supermotivated work force capable of breaking through
industry-accepted barriers to efficiency and customer service.